tv [untitled] December 6, 2011 4:30pm-5:00pm EST
good afternoon and welcome to capital account i'm more in leicester here in washington d.c. and as the violence increases between the west and iran is a covert war against iran already underway le bron's revolutionary guard is reportedly preparing for it what will this mean for oil prices we've seen them on the rise a bit this week and with the u.s. senate voting unanimously for harsh new sanctions against the wrong that could cause oil prices to actually rise benefiting the islamic republic what exactly is the strategy here and who stands to benefit meanwhile u.s.
treasury secretary timothy geitner is in europe at president obama's request now he is not a eurozone official obviously he says the u.s. won't bail out europe so what exactly is he doing there. i'm here in europe of course to emphasize home port is to the united states and to the world economy as a whole that germany and france succeed alongside the other nations of europe and building a stronger europe. we'll see how that goes meanwhile what is the s. and p. trying to do issuing a downgrade warning for fifteen euro zone countries the ratings agency uses politics to justify the downgrade saying european policymakers continue to disagree over how to tackle the debt crisis but is as in p. trying to tackle its own crisis trying to hedge its bets to improve its own reputation and restore confidence after notorious wrong calls it made ahead of the two thousand and eight financial crisis and one unexpected casualty of the eurozone
crisis it's chocolate we'll show you how debt is taking a toll on cocoa let's get to today's capital account. so the big question are we seeing signs that a covert war by the u.s. in cooperation with israel against iran or cold war between iran and its enemies is underway right now this is what analysts and articles from reuters to the atlantic are asking and it's what iran is preparing for the telegraph reports of iran's revolutionary guard is preparing for war getting ready for potential strikes and covert attacks let's break down some of the reasons why so iran claims sunday it
shot down a stealth u.s. drone that is what one looks like it is not the one that was shot down but there you can see it now american officials discount the claim but two u.s. officials admitted to c.n.n. that the drone that crashed in iran was part of a cia mission in fact add to that iranian nuclear scientists that has been killed or disappeared this dux net computer worm which damaged computers in iran's industrial machinery was widely believed to be a u.s. israeli attack to cripple iranian nuclear centrifuges and add a couple explosions last month in your brawn the storming of britain's embassy in tehran so what is all of this mean for the price of oil all of these signs say hey maybe a covert war is in fact underway will iran is the third largest exporter of oil and what leaders meet this week iran may face a full ban of oil imports to europe as
a result of what europe is believed to be pushing for meanwhile the u.s. senate last week unanimously voted unanimously let me just emphasize that for harsh sanctions against iran now iran in response to all of these threats of sanctions has warned that crude oil could go to two hundred fifty dollars a barrel if western sanctions abruptly reduce or halt oil exports now obama officials have testified that the proposed u.s. sanctions could. dr oil prices are actually helping iran financially now to get to the bottom of all of this and what we really can expect to see is author of this book red alert he is also chief and vestment officer of lead capital management dr stephen leeb is here to help us figure all of this out because some major stuff we're talking about so it's so nice to see you dr leave always a pleasure to have you in our new york studio thank you so much loren really appreciate being here absolutely so let's get right to it because in response to
the new round of kind of expected or proposed western sanctions on iran iran issued a warning saying that oil could go to two hundred and fifty dollars a barrel if their exports are abruptly reduced or abruptly halted do you see this as a justifiable threat. i think it's something of a threat i don't think two hundred fifty dollars is in our near term future but i do think prices like better definitely in our long term future but the rand would just be one of the reasons near term i mean iran has a very ready customer for their oriel fungible that it doesn't matter word comes from i mean the chinese are not going to boycott a rand i can assure you of that china wants what's right for china and if we boycott iran and your board cuts a rant i mean china will take all the oil they can get from iran so i don't see massive threat to you know super high oil prices anytime soon but i think iran is
definitely got threat i think there are a huge threat to saudi arabia and i definitely think there's a cold war going on and i think for very good reasons ok well that's interesting but i want to stay on this over the oil prices thing because we saw last week the u.s. senate unanimously vote for sanctions against iran new sanctions harsh sanctions that target petroleum and we saw the obama administration come out in opposition and say hey i don't know if we want to do this and wendy sherman an undersecretary of state gave this as one reason why she said that there is absolutely a risk that in fact the price of oil would go up which would mean that iran would in fact have more money to fuel its nuclear ambitions not less now not to mention this would mean higher prices for u.s. consumers so i'm just curious you know as i mention the senate unanimously passed these sanctions everyone voted for them is this an example of the western short term thinking that you often refer to. well i think it probably is i mean there's
nothing that we're going to do except possibly help iran for oil prices go higher we're not going to really cripple their economy that's for sure because again they're all i don't think they're all exports are going to be shut in but i think the fear that boycotting the rand by the way i think that we were alone would be enough to drive oil prices higher and that is absolutely the last thing we need in this economy right now i mean some of the most compelling dad that i've seen i mean there's a lot of talk about inequalities so i'm just speaking in terms of numbers right now the bottom twenty percent of this economy spends fifty five percent of their income on energy and food i mean you know and those percentages let's say the bottom twenty percent may next year be the bottom thirty percent i mean this is not a favorable trend and to do anything that would encourage higher energy prices i think is just awful for this economy so i think we have to be very careful how we
deal with iran i think they are incredible threat and especially again to saudi arabia who is the number one oil producer in the world i think it's a very good idea to try and contain them but it's a it's a tight rope that we're walking because if we do induce higher oil prices that could be a total nightmare for the western world absolutely and a lot of our less of what you think about the politics in the region or or what the u.s. could and should be doing in response i think it's a really interesting point you bring up about the impact of that rise in oil because you wrote in a recent article that unlike the seventy's high commodity prices today while still inflationary also serve as what can be termed a deflationary tax on the economy do you mean that higher commodity prices like oil prices would put some sort of cap on economic growth. no absolutely lauren i mean you know the worst thing that this economy could experience right now would be
a big hike in oil prices or for that matter any other commodity prices but oil is the most used of any commodity and you know this there's nothing good about rising oil prices unless you're producing the oil at once they slow down the economy and they also create more inflation that's exactly what happened to us in two thousand and eight i mean if we're at one hundred fifty dollars today it would be a much worse situation than two thousand and eight because at least in two thousand and eight unemployment was quite a bit lower it's cetera i mean i think the thing. or let's say one thirty or one forty would have to ignore inflation and would probably have to you know really engage in more monetary easing just to keep the economy afloat i mean you know we have to back up i mean central bankers are more or less obsessed with inflation but the real threat to this world right now is the flight and depression and things
like they had i mean. i want to ask a follow up and i just have a minute for an answer but i've got to know the answer to this because you're saying economic slowdown but higher prices so does this mean that unlike the seventy's where we saw higher prices but you also saw nominal wage increases does this mean that now we cannot expect to see wage increases along with higher prices . not right away i think eventual you'll have to see higher wages just will or else you'll just have an impoverished country but right away it's just going to mean you know it's going to be just absolutely horrible economy for for many many u.s. citizens if you good or loved to let's say one thirty one forty i mean people won't be a phone won't be able to afford to drive or be very very serious certainly something to think about especially as we just heard u.s. president barack obama today talking about the threat that he feels inequality is you know it's interesting to see that the senate may be doing things to work directly against what he's trying to achieve there i want to continue this
conversation dr levy i just want to hold on for one second though because i got to tell our audience a few things to keep them up to date on our word of the day and we will get right back to you. all right it's time now for word of the day where we break down a financial term or concept for our very smart viewer but just perhaps not the financial expert and today it is g.d.p. this is gross domestic product and there are a few measures of it out today which is why it's in the news let's take a look at them so we see the brazil's economy contracts as rousseff that's the president cut taxes and rates to boost demand now this happened one week after announcing stimulus measures to contain the spillover from europe's debt crisis brazil's g.d.p. contracted zero point zero four percent from the previous three months from the
prior quarter and in europe we see this report that g.d.p. is on par with expectations this is as the market of course awaits the euro summit later this week now how did it come in it is in line with expectations for zero point two percent growth but what does g.d.p. really tell us about the health of an economy that's really the question we'll get to that but first the nuts and bolts of g.d.p. so what is it is that this let's take a look at the definition the monetary value of all the finished goods and services produced within a country's borders in a specific time period now it includes all of private and public consumption government outlays investments and exports less imports that occur within a defined territory so g.d.p. then is really just a measure of economic activity within a nation's own borders so let's get back to the question though what it really
tells us about the health of an economy and we can take the u.s. as an example to show us the g.d.p. was growing. up until the financial crisis of two thousand and eight so you can see right here that it first contracted in the third quarter of two thousand and eight got a lot worse after that well g.d.p. could tell us plenty about the extent of economic activity but it tells us absolutely nothing about the quality of that activity and so how sustainable that very growth is so to understand how all of this growth was happening right before it tanked let's think about the housing bubble ok here is an example of how excited people were about it it was great for home builders for banks for retailers and out jews. now this cover is all about that home sweet home why everyone's going gaga over real estate this is from two thousand and five so good for all those industries and you can see that g.d.p. was growing during that time here's two thousand and five ok but alas the housing
bubble turned out to be a really bad investment for the economy that blew up as a global financial crisis was under way after only a few good years of partying on that cheap credit so you can see now you know what g.d.p. is and why you should think twice before looking at all growth as good growth. and still ahead right now capital cat did not go away yesterday we showed you how the vice president called john for a sign for economic advice today we will show you how john ford's i may have been paying president bill clinton for image advice but first your clothes and stuff numbers. above. it we just put a picture of me when i was like nine years old until she told the truth.
i'm a confession i am a total get over princess i love driving hip hop music and for. that it was kind of a bit yesterday. i'm very proud of the will without you she has played. my love my. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else here sees some other part of it and realize everything you thought you knew you don't know i'm charged welcomes a big picture. of.
what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is you view with a global mission a region where we had a state controlled capitalism. it's called sessions when nobody dares to ask we do our t. question morning. welcome back ok switching gears to europe we have seen the s. and p. the ratings agency issue a downgrade warning for fifteen euro zone nations just almost all of them now the e.u. is talking of doubling its financial fire wall but is this
a nuff to prevent europe from tipping back into recession dragging the u.s. and asia possibly with it well author in chief mint chief and best man officer of the lead capital management dr stephen leeb is back with us to help answer some of these questions now i first want to bring our producer dimitri us into the conversation because he wants to ask you a question about this dr lee. before you were talking lauren about how inflation and commodity prices would actually believe the flay share in a real sense for the economy and we know that a lot of those those commodities have gone up in price as a result of a lot of demand from asia specifically china if we see a slowdown in china as some people like jim chanos has been talking about for a while and marc farber as well what do you think that would do the effects of a nominal nominal deflation in commodities and what effect would that have overall for economic growth we saw even a slowdown or even possibly a contraction in china or just a hard landing. well i think if you saw a genuine hard landing were g.d.p.
growth fill the let's say two or three percent i think you'd really have a lot of social unrest in china and you'd have much less growth in the world i think you really set the stage for really chaotic conditions but those part of those conditions wouldn't have to be rising commodity prices you're absolutely correct i mean commodity prices would absolutely plummet but i have to say i just don't see any evidence of that at all i mean china right now plans to spend about two and a half trillion dollars that's a war like number over the next four years a new winner a new energies a new industries. i think get it about oil and they get it about other commodities they're stockpiling copper etc you know given those kinds of expenditures and china is ability to make those kinds of expenditures it's awfully hard for me to see china having anything resembling a hard landing could grow slow to eight percent yes next year sure but i mean how
many times in this country's history have we ever had eight percent growth period never never so i mean you're talking about slowing to eight percent i mean that's incredibly rapid growth yeah get us thinking in the spirit of a global slowdown obviously we've seen a much larger slowdown from europe which is barely barely doing anything and many many people believe it's going to go into recession and could you rail economies like the united states could have an impact on china we saw the s. and p. do a downgrade warning issued for fifteen of those eurozone countries i'm wondering if you think that this is merited legitimate or if you think they're kind of trying to cover themselves because of what a bad rap they got after failing to make a bunch of calls in the two thousand and answer crisis. i think lauren it's all of the above i think that you know putting the euro countries on credit watch is a no brainer in the sense that if something does go wrong in these talks the your
the euro countries could break apart and it would be catastrophic for everybody and i mean people don't realize how catastrophic that would be for germany i mean everybody looks to germany as the the solid the strong the stable country in europe and that's true but that's because the german mark the germans are really getting a free ride on the back of the euro if something went wrong with the euro and germany were forced to go back to the d. mark because of their very good financial position their d. mark would would appreciate dramatically and that would shut in their exports and that would probably create a depression i'm not saying recession i'm saying depression in germany within a few months and that would lead to the kind of hyper inflation because they really have to you know pump up money supply etc that they've been trying to avoid that they've been so fearful of so you know what i'm saying is that every country in the euro zone is extremely vulnerable in different ways to the euro breaking up and for
that reason i don't think it's going to happen i think they will absolutely cobble together some sort of agreement that will keep everybody together and dr lee because as dr lee quickly the i.m.f. there is talk that they may play a larger role in that kind of a solution do you think that there could and should be a larger role for some of the big emerging economies like you mentioned china that have such huge growth and kind of a solution for you. yeah i think china definitely will play a larger role i think that they'll make bigger investments in europe they certainly have the resources over three trillion dollars in foreign exchange reserves and yeah i mean europe is important to everybody europe represents about twenty trillion dollars of the world's product that's the largest single chunk. anybody represents so it's certainly in the interest of china it's in the interests of the us that's why they're i mean but you know it's so important that even as a last gasp i think our federal reserve would probably end up buying european bonds
that's not a prediction but it's saying that we just can't let europe fail and everybody from germany to the united states to china knows they have and they know it big time isn't it same point you bring up as there were those rumors that the fed would fund some kind of a bailout through the i.m.f. geithner is out there is denying those today will have to wait and see what happens but i certainly appreciate you being in our studio and giving us all of your valuable insight that was dr steven levy. thank you very much. all right we've been speaking about the sovereign debt crisis in europe as well as commodities now i want to bring in our producer dimitri kofi eunice as well as
shannon donahoe in the control room to talk about this story that in four parades both because this softened crisis in europe has claimed really unexpected casualty to give you a hint watch this. is. a job we don't believe but a big. all right it's not butter fingers exactly and it's not exactly chocolate but what is the main ingredient in chocolate i think along with sugar cocoa ok and this is the unexpected casualty europe is the largest consumer of cocoa worries about the slowdown have combined with some other issues some harvest issues to push prices to their lowest point in years three years for cocoa so what is really going to be the fallout of this cocoa crisis dimitry well you know it could be really bearish for
the swiss economy because you know they export a lot of chocolate chocolate swiss chocolate germany takes about twenty percent of those exports france is next on line and then the north america is so this could actually cause the swiss central bank to use credit more lower rates you could kind of drop the value of the swiss franc because you know this was economies are heavily heavy chuckle chuckle in this economy chocolate induced in katine so a chocolate bailout. what you're calling a butter finger bailout or. a brown pelican i like the butterfinger belt but just i think to reassure people i don't think prices would be i don't think the increases would be passed along to consumers for some time normally chocolate companies eat them which is why literally there is obviously this price yeah exactly literally shannon you are you concerned about this cocoa decline you're concerned about the farmers i know. well i like the farmers are going to get you know as much as they do or. that's. right so there would be
a bailout for the chocolate makers but not the farmer in this kind of sordid world we live in this is speaking of sordid ok so m.f. global obviously we have gone over what is going on with john pours i pretty much every single day now a former m.f. global employee is accusing former president bill clinton of collecting fifty grand a month from m.f. global clinton's advisory firm was hired by m.f. global's former c.e.o. junk or zine to improve his image and enhance his connections with clinton's political family to get a glimpse of them hears them in action a couple years ago. i'm here for three reasons the first of. all i know is that if clinton still has any role in public image he's got a lot of work to do now is not funny that was six months pay right there. so expose what he you know he went and campaigned with course that's what the fifty thousand
dollars a month is for but i also absurd that clinton is giving advice something i write is the first president i got. ph to do oral sex with you know because he had to come back from that get out that for a while his image was really bad but then you know people love bill clinton he also got a piece over the address so i don't know i know the people forgot about disaster know that this was a disaster because he has experience with disasters so you know i guess he could help john course i know now is when drunk or as i really help. now it is so remains to be seen if there are still these ties i doubt it after that story shannon is there any big politician who is not going to be tied to john corazon when all is said and done in the coverage on our show that is my question for you i don't think so yeah i think we're going to catch everyone i think are probably right every day a new politician tied on capital account moving on this is a really interesting way to tie welfare the ninety nine percent to the one percent federal agency a seattle where welfare recipient lives in
a million dollar home just look. at the place where you would expect to find a down on her luck welfare recipient but newly unsealed court documents say a woman who receives state and federal welfare payments has been living on this waterfront property since two thousand and three property records show the twenty four hundred square foot home with gardens and big view windows is valued at one point two million dollars. very quickly and i speak for someone on welfare you know the moment percent or no hiding out at the one percent so that's what you're seeing here is getting welfare so this is you know it's an example of what you get when you get a humongous welfare state that we have as big i think these stories are the exception i think a lot of people do need welfare but i think that's all we have time for because that's it for our show thank you so much for tuning in please feel free to follow me on twitter at war and lester and to give us feedback on the show at our you tube channel youtube dot com slash capital account i will respond to some of your